Tim Warrillow could have been forgiven for pouring himself a stiff G&T when the Covid-19 pandemic took hold (Dominic Walsh writes). The Fevertree chief executive had just launched a new range of premium-flavoured sodas, yet this important point in the company’s development was in danger of fizzling out as pubs, bars and restaurants — collectively the on-trade — were forced to shut.
Initially, he thought that the launch would struggle. However, even without being able to sample the new range in the on-trade, sales through supermarkets and other retailers started to take off and people were soon making repeat purchases.
Its range of four low-calorie sodas, comprising Raspberry & Rose, Mexican Lime, Italian Blood Orange and White Grape & Apricot, are designed to pair with spirits in a “spritz serve”. In an unusual move, Diageo agreed to do a joint promotion in Sainsbury’s stores for its Smirnoff vodka with the Blood Orange soda.
At about the same time as its push in Britain, in the United States Fevertree was launching another soda, Sparkling Pink Grapefruit, aimed at tequila drinkers who fancy a Paloma cocktail. With tequila accounting for 12 per cent of the American spirits market, Mr Warrillow is confident that it can maintain the momentum.
He insists that it is “still early days” for sodas and although new additions to the range are likely, Fevertree’s innovation team is still focusing on the core tonic market — the Mediterraean tonic has been a big seller — and is believed to be plotting the launch of another flavoured tonic.
Fevertree was established in 2004 by Mr Warrillow, 45, and Charles Rolls to make high-quality tonic for the premium gin market and it now sells a range of mixers in more than 75 countries. Its shares, which were floated at 134p in November 2014, enjoyed a stellar first few years, peaking at £37.23 in August 2018, and the two men have made £330 million from selling shares.
The share price may have retreated since then, but on Monday Mr Warrillow was still able to collect a further £3.5 million from cashing in shares awarded under long-term incentive plans, while Andy Branchflower, chief financial officer, collected £1.6 million. They sold the shares at about £20.19, a little below yesterday’s close of £21.83.
While its innovation team is run in-house, production is farmed out to third-party manufacturers and the group said at its recent half-year results that part of the reason for its resilience during the pandemic was its “asset-light, outsourced business model with few capital commitments and a low fixed-cost base”.
It has cash of almost £140 million on its balance sheet and, as well as eschewing any government funding, Fevertree is one of the few companies to have raised the dividend and its employee headcount during the pandemic.
Although not immune to the closure of the on-trade in most of the countries in which it sells, its sales for home consumption mitigated the impact. In the UK, its biggest market, a 61 per cent slump in on-trade sales was partly offset by a 24 per cent jump in the off-trade as consumers mixed their own G&T or whisky and ginger at home. US figures out yesterday from Nielsen show its August market share rising by 47 per cent, up from 43 per cent in July, continuing its strong run this year.
While the on-trade has now largely reopened, Fevertree admits that the second half will remain challenging and its reinstated guidance is for full-year revenues of between £235 million and £243 million, down from £260.5 million last year.
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Greencore
In a typical year, Greencore makes about 700 million sandwiches (Callum Jones writes). This hasn’t been a typical year, of course, and amid the pandemic and lockdowns the Irish convenience foods group has had to put down its butter knife and wait for normality to return.
It hasn’t yet. Even now that most of the shops that sell its products have reopened, a significant portion of their customers — office-based workers on their lunch breaks — remain at home. Although Boris Johnson has claimed that Britons are returning to the workplace in huge numbers, there has been no sudden surge back to desks.
In turn, the slow pace of the return to normality — new, old or somewhere inbetween — has reinforced doubts over the pace of Greencore’s convalescence that are unlikely to dissipate any time soon.
At the height of lockdown, between late March and June, Greencore’s food-to-go revenues halved. Two months ago Patrick Coveney, its chief executive, said that the FTSE 250 company was “well positioned” for a “return to growth as the pandemic subsides” after it reported a 34 per cent drop in overall third-quarter revenues. As its financial year draws to a close on September 25, however, Greencore continues to be dogged by uncertainty over just how long its trading will take to recover. Its shares are far shy of half the level at which they started the year.
An additional concern is its vulnerability to further bursts of Covid-19. Consider August’s sudden closure of its Northampton plant, one of 16 facilities in England, after hundreds of staff tested positive: the site reopened quickly after a deep clean, but its temporary shutdown underlined the risk that the virus poses to food processing operations.
Greencore, which supplies all the country’s leading supermarkets, is not by any means yet through the woods. It will continue to grapple with sluggish demand and sporadic threats to supply for a undetermined period of time, frustratingly for the company and for shareholders. November’s annual results will shine a light on how far it is along its path to recovery, but the road ahead is likely to be long. Guidance remains suspended.
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